Tough decisions are often inevitable if a business wants to make money. But in the next few weeks, half a dozen US states are expected to pass legislation that will for the first time protect companies which value their social impact as much as the bottom line.
Whether it's buying locally, protecting the environment or launching community projects, the new "benefit corporations" have a common mission - to do well by doing good.
"It's becoming a national movement," says Penny Jones-Napier, owner of the Big Bad Woof pet store in Hyattsville, Maryland, the first business in the US to adopt the new benefit corporation designation. "What started with small businesses is moving into the mainstream."
Whether it's buying locally, protecting the environment or launching community projects, the new"benefit corporations" have a common mission - to do well by doing good.
As a benefit corporation, BigBad Woof is protected from legal action if it makes decisions that aren't in the financial interests of its shareholders. The company can support local suppliers for instance, even though that might not be the cheapest option and could reduce the profit margin. MsJones-Napier says her customers are also happy to pay extra to support the company's values. Since opening in August, she says the store has made $500,000(£310,000), and is on track for an annual turnover of $1.4m.
"Benefit corporations are brilliant because they allow companies to pursue profit - for which no-one should apologize - and at the same time have a positive impact on society," says corporate legal expert Laura Jordan of The Capital Law Firm in Washington DC. Whereas the two goals were once seen as incompatible, people in their 20s and 30s regard them as complementary, she says. "They want to use the power of business to change the world."
Benefit corporations must setout clearly in their business charters what they will contribute and how it will improve society. The social mission becomes part of the company's DNA, says Ms Jordan. "Being a benefit corporation adds an extra layer of legitimacy. It's a public declaration that we've made. It's still a long way from becoming, but it's exciting because the idea is in the public consciousness."
Seven states, including New York and California, have already adopted the new business class. These seven states combined produce a third of America's annual economic output, which makes their support for benefit corporations significant, says Andrew Kassoy, co-founder of B Lab. A non-profit organization, B Lab was launched five years ago to harness the power of small businesses to help solve social and environmental problems. It offers certificates called a B Corp for businesses that meet minimum performance standards and consider the interests of stakeholders as well as shareholders. "It's a bit like the Fairtrade certificate for coffee, only B Corp applies to the whole business," says Mr. Kassoy Benefit corporations emerged a few yearslater as a logical extension of that grassroots movement, he adds.
Last year, Farm Community Consulting became the first company in Virginia to become a benefit corporation. It's an adjunct to Blue Ridge Produce, a local food aggregation business that is also B Corp certified. Locally grown pumpkins destined for markets sourced by Blue Ridge Produce Blue Ridge Produce helps small farmers get their produce to stores
"I have been interested in philanthropy for a long time," says chairman Jim Epstein. "When the concept of B Corp came along it totally resonated with me and how I saw the future."
His business helps around 10,000 small farmers connect with wholesalers, supermarkets and distributors. "It's a move away from big agriculture," he says. "Being a benefit corporation adds an extra layer of legitimacy. It's a public declaration that we've made. It's still a long way from becoming mainstream, but it's exciting because the idea is in the public consciousness."
The company is little more than a year old but employs five people and reports a turnover of $3m. Mr. Epstein believes it represents a new business model that will one day replace the "amoral" practices of big corporations.
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